Templeton Emerging Markets lagged its benchmark index, The MSCI Emerging Index, by 3.6% over the year to the end of March 2015, returning 9.6% against 13.2% for the benchmark. In addition the discount widened from 10.9% to 13.3% leaving shareholders with a return of 6.9%.
The dividend was increased from 7.25p to 8.25p.
The manager’s report says that, by sector, investments in materials, energy and financials were the major detractors to the performance relative to the benchmark index.
Vale, Kumba Iron Ore and Impala Platinum, all in the materials sector, were the three companies that had the biggest adverse impact on the portfolio – taking 1.5%, 1% and 0.8% off the value of the portfolio respectively. Falling iron ore prices hit the first two companies. Impala was affected by a five month strike and weak platinum prices.
Stocks in the energy sector were impacted by lower oil and gas prices as well as oversupply concerns. Key detractors included Petroleo Brasileiro (Petrobras), SK Innovation and PTT Exploration and Production.
In the financial sector, overweight positions in major Brazilian commercial banks, Itau Unibanco and Banco Bradesco, were the largest detractors. Both stocks experienced single-digit declines in share price during the reporting period. Lack of exposure to Bank of China, China Construction Bank and Industrial and Commercial Bank of China, which reported strong gains during the period, also worked against TEMIT’s performance relative to the benchmark index. Against that, holdings in Kasikornbank, Siam Commercial Bank and Bank Central Asia all saw double-digit gains and contributed positively to performance in the past 12 months.
The three largest positive contributors to performance were Brilliance China Automotive (Chinese luxury car producer with jv with BMW), Hyundai Development (South Korean residential property developer) and Tata Consultancy Services (Indian IT consulting company). These here added 2.3%, 1.9% and 1% to the portfolio respectively.
TEM : Templeton hurt by resources exposure